What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-16 compared with 2021-11-10 · 177 added, 428 removed, 25 unchanged (96% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

following Management’s Discussion and Analysis should be read in conjunction with our financial statements and the related notes

thereto included elsewhere herein.

The Management’s Discussion and Analysis (“MD&A”) contains forward-looking statements

that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions.

Any statements that

are not statements of historical fact are forward-looking statements.

When used, the words “believe,” “plan,”

“intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or

future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or

similar expressions, identify certain of these forward-looking statements.

These forward-looking statements are subject to risks and

uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements

in this form.

Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements

as a result of several factors.

results may not indicate future performance.

Our forward-looking statements reflect our current views about future events, are based

on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from

those contemplated by these statements.

We undertake no obligation to publicly update or revise any forward-looking statements, including

any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements.

The following Management’s Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere herein.

The Management’s Discussion and Analysis (“MD&A”) contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions.

Any statements that are not statements of historical fact are forward-looking statements.

When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements.

These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the

forward-looking statements in this form.

Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors.

Historical results may not indicate future performance.

Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements.

We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements.

Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.

are a technology company that is seeking to become a world leading innovator and integrator of interactive products and software for

schools, education, business, and government interactive spaces.

We currently design, produce and distribute interactive displays, collaboration

software, supporting accessories and professional services.

We also distribute science, technology, engineering, and math (or “STEM”)

products, including our robotics and coding system, 3D printing solution and portable science lab.

Our products are integrated into our

software suite that provides tools for presentation creation and delivery, assessment, and collaboration.

date, we have generated substantially all our revenue from the sale of our hardware (primarily consisting of interactive displays) and

software to the educational market in the United States and Europe.

have also implemented a comprehensive plan to reach and maintain profitability both from our core business operations and as a result

of making strategic business acquisitions.

We are a technology company that is seeking to become a world-wide leading innovator and integrator of interactive products and software for schools, education, business, and government interactive spaces.

We currently design, produce and distribute interactive displays, collaboration software, supporting accessories and professional services.

We also distribute science, technology, engineering, and math (or “STEM”) products, including our robotics and coding system, 3D printing solution and portable science lab.

Our products are integrated into our software suite that provides tools for presentation creation and delivery, assessment, and collaboration.

To date, we have generated substantially all of our revenue from the sale of our hardware (primarily consisting of interactive displays) and software to the educational market in the United States and Europe.

We have also implemented a comprehensive plan to reach and maintain profitability both from our core business operations and as a result of making strategic business acquisitions.

Highlights of our plan include:

products of the acquired companies and cross training our sales reps to increase their offerings and productivity.

new sales representatives with significant industry experience in their respective territories.

our reseller partner network both in key territories and in new markets, thereby increasing our penetration and reach.

March 23, 2021, the Company acquired 100% of the outstanding shares of Interactive Concepts BV, a company incorporated and registered

in Belgium and a distributor of interactive technologies (“Interactive”), for total consideration of approximately $3.3 million

in cash, common stock, and deferred consideration.

Interactive has been the Company’s key distributor in Belgium

and Luxembourg.

September 24, 2020, the Company acquired Sahara Presentation Systems PLC, a leader in distributed and manufactured AV solutions (“Sahara”).

Headquartered in the United Kingdom, Sahara is a leader in distributed AV products and a manufacturer of multi-award-winning touchscreens

and digital signage products, including the globally renowned Clevertouch and Sedao brands.

In consideration for the acquisition, the

Company paid to the shareholders of Sahara a total purchase price of GBP 74.0 million (approximately USD $94.9 million) in the form of

GBP 52.0 million (approximately USD $66.7 million) in cash and GBP 22.0 million (approximately USD $28.2 million) in our Series B convertible

preferred stock and our Series C convertible preferred stock.

Strategy and Challenges

growth strategy includes acquiring assets and technologies of companies that have products, technologies, industry specializations or

geographic coverage that extend or complement our existing business.

The process to undertake a potential acquisition is time-consuming

We expect to expend significant resources to undertake business, financial and legal due diligence on our potential acquisition

targets, and there is no guarantee that we will complete any acquisition that we pursue.

believe we can achieve significant cost-savings by merging the operations of the companies we acquire and after their acquisition leverage

the opportunity to reduce costs through the following methods:

reductions – consolidating resources, such as accounting, marketing, and human resources.

of scale – improved purchasing power with a greater ability to negotiate prices with suppliers.

market reach and industry visibility – increase in customer base and entry into new markets.

of our Results of Operations and Financial Condition

are comprised of hardware products, software services, and professional development revenues less sales discounts.

Product revenue is derived from the sale of our hardware (interactive projectors), flat panels, peripherals, and accessories,

along with other third-party products, directly to our customers, as well as through our network of domestic and international distributors.

development revenue.

We receive revenue from providing professional development services through third parties and our network

of distributors.

cost of revenues is comprised of the following:

to purchase components and finished goods directly;

logistics costs;

and outbound freight costs, and customs and duties charges;

associated with the repair of products under warranty;

of inventory carrying value to adjust for excess and obsolete inventory and periodic physical inventory counts;

of professionals to deliver professional development training related to the use of our products.

outsource some of our warehouse operations and order fulfillment and purchase products from related and third parties.

Our product costs

will vary directly with volume and the costs of underlying product components as well as the prices we are able to negotiate with our

contract manufacturers.

Shipping costs fluctuate with volume as well as with the method of shipping chosen in order to meet customer

As a global company with suppliers centered in Asia and customers located worldwide, we have used, and may in the future use,

air shipping to deliver our products directly to our customers.

Air shipping is more costly than sea or ground shipping or other delivery

● Integrating products of the acquired companies and cross training our sales reps to increase their offerings and productivity.

● Hiring new sales representatives with significant industry experience in their respective territories.

● Expanding our reseller partner network both in key territories and in new markets, thereby increasing our penetration and reach.

Recent Acquisitions

On December 31, 2021, the Company and its wholly owned subsidiary, Boxlight, Inc, consummated the acquisition of 100% of the membership interests of FrontRow Calypso LLC, a Delaware limited liability company (“FrontRow”).

FrontRow was acquired in exchange for payment of $34.7 million to Phonic Ear Inc.

and Calypso Systems LLC, the equity holders of FrontRow (the “Equityholders”).

The acquisition occurred pursuant to the terms of a membership interest purchase agreement, dated October 29, 2021 (the “Purchase Agreement”), between the Company, Boxlight, FrontRow and the Equityholders.

Based in Petaluma, California, FrontRow makes technology that improves communication in learning environments, including developing network-based solutions for intercom, paging, bells, mass notification, classroom sound, lesson sharing, AV control and management.

FrontRow also has offices in Toronto, Copenhagen, Brisbane, Hamilton (UK) and Shenzhen

On March 23, 2021, the Company acquired 100% of the outstanding shares of Interactive Concepts BV, a company incorporated and registered in Belgium and a distributor of interactive technologies (“Interactive”), for total consideration of approximately $3.3 million in cash, common stock, and deferred consideration.

Interactive has been the Company’s key distributor in Belgium and Luxembourg.

Acquisition Strategy and Challenges

Our growth strategy includes acquiring assets and technologies of companies that have products, technologies, industry specializations or geographic coverage that extend or complement our existing business.

The process to undertake a potential acquisition is time-consuming and costly.

We expect to expend significant resources to undertake business, financial and legal due diligence on our potential acquisition targets, and there is no guarantee that we will complete any acquisition that we pursue.

We believe we can achieve significant cost-savings by merging the operations of the companies we acquire and after their acquisition leverage the opportunity to reduce costs through the following methods:

● Staff reductions – consolidating resources, such as accounting, marketing, and human resources.

● Economies of scale – improved purchasing power with a greater ability to negotiate prices with suppliers.

● Improved market reach and industry visibility – increase in customer base and entry into new markets.

Components of our Results of Operations and Financial Condition

Revenues are comprised of hardware products, software services, and professional development revenues less sales discounts.

● Product revenue.

Product revenue is derived from the sale of our hardware (interactive projectors), flat panels, peripherals, and accessories, along with other third-party products, directly to our customers, as well as through our network of domestic and international distributors.

● Professional development revenue.

We receive revenue from providing professional development services through third parties and our network of distributors.

Cost of revenues

Our cost of revenues is comprised of the following:

● costs to purchase components and finished goods directly;

● third-party logistics costs;

● inbound and outbound freight costs, and customs and duties charges;

● costs associated with the repair of products under warranty;

● write-downs of inventory carrying value to adjust for excess and obsolete inventory and periodic physical inventory counts;

● cost of professionals to deliver professional development training related to the use of our products.

We outsource some of our warehouse operations and order fulfillment and purchase products from related and third parties.

Our product costs will vary directly with volume and the costs of underlying product components as well as the prices we are able to negotiate with our contract manufacturers.

Shipping costs fluctuate with volume as well as with the method of shipping chosen in order to meet customer demand.

As a global company with suppliers centered in Asia and customers located worldwide, we have used, and may in the future use, air shipping to deliver our products directly to our customers.

Air shipping is more costly than sea or ground shipping or other delivery options.

We primarily use air shipping to meet the demand of our products during peak seasons and new product launches.

profit and gross profit margin

gross profit and gross profit margin have been, and may in the future be, influenced by several factors including:

product, channel,

and geographical revenue mix;

Gross profit and gross profit margin

Our gross profit and gross profit margin have been, and may in the future be, influenced by several factors including:

product, channel, and geographical revenue mix;

changes in product costs related to the release of projector models;

component, contract manufacturing

and supplier pricing and foreign currency exchange.

As we primarily procure our product components and manufacture our products in Asia,

our suppliers incur many costs, including labor costs, in other currencies.

To the extent that exchange rates move unfavorably for our

suppliers, they may seek to pass these additional costs on to us, which could have a material impact on our future average selling prices

and unit costs.

component, contract manufacturing and supplier pricing and foreign currency exchange.

As we primarily procure our product components and manufacture our products in Asia, our suppliers incur many costs, including labor costs, in other currencies.

To the extent that exchange rates move unfavorably for our suppliers, they may seek to pass these additional costs on to us, which could have a material impact on our future average selling prices and unit costs.

Gross profit and gross profit margin may fluctuate over time based on the factors described above.

classify our operating expenses into two categories:

Operating expenses

We classify our operating expenses into two categories:

general and administrative and research and development.

and administrative.

General and administrative expense consists of personnel related costs, which include salaries and stock-based

compensation, as well as the costs of professional services, such as accounting and legal, facilities, information technology, depreciation

and amortization and other administrative expenses.

General and administrative expense may fluctuate as a percentage of revenue, notably

in the second and third quarters of our fiscal year when we have historically experienced our highest levels of revenue.

and development.

Research and development expense consists primarily of personnel related costs, prototype and sample costs, design

costs and global product certifications mostly for wireless certifications.

income (expense), net

income (expense), net primarily consists of interest expense associated with our debt financing arrangements, gains (losses) on the settlements

of debt and trade payable obligations exchanged for common shares, and the effects of changes in the fair value of derivative liabilities.

are subject to income taxes in the jurisdictions in which we do business, including the United States, United Kingdom, Mexico,

Sweden, Finland, Holland, and Germany.

The United Kingdom, Mexico, Sweden, Finland, Holland, and Germany have a

statutory tax rate different from that in the United States.

Additionally, certain of our international earnings are also taxable in

the United States.

Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to U.S.

absorption of foreign tax credits, changes in the valuation of our deferred tax assets and liabilities and changes in tax laws.

assess the likelihood of adverse outcomes resulting from the examination of our tax returns by the U.S.

Internal Revenue Service, or

IRS, and other tax authorities to determine the adequacy of our income tax reserves and expense.

Should actual events or results differ

from our current expectations, charges or credits to our income tax expense may become necessary.

Any such adjustments could have a significant

impact on our results of operations.

Results – Boxlight Corporation

the three-month periods ended September 30, 2021 and 2020

Total revenues for the three months ended September 30, 2021 were $61.0 million as compared to $9.5 million for the three months

ended September 30, 2020, resulting in a 544% increase in revenue.

Revenues primarily consist of hardware revenue, software revenue,

and professional development.

The increase in revenues was primarily due to the acquisitions of Sahara Presentation Systems in September

2020 and Interactive Concepts in March 2021 as well as increased demand for our solutions in the U.S.

Cost of revenues for the three months ended September 30, 2021 was $ 45.2 million compared to $7.5 million for the three

months ended September 30, 2020, resulting in a 507% increase.

Cost of revenues consists primarily of product cost, freight expenses,

customs expense, and inventory adjustments.

The increase in cost of revenues was associated with the acquisitions and growth of the business

as outlined above and was also due to additional increases in global freight/shipping which the company has experienced (as have many

others) as a result of supply chain issues arising as a result of the COVID-19 pandemic.

In the first quarter of 2021 we reported

the cost increase to be approximately four times normal costs as compared to pre-pandemic levels.

We expect such cost increases

to continue throughout 2021.

Gross profit for the three months ended September 30, 2021, was $15.8 million, as compared to $2.0 million for the three

months ended September 30, 2020.

Gross profit margin increased from 21% to 26% despite the effects of increased freight and

shipping expenses discussed above, product cost increases (which have been partially offset by increased sales prices) and certain

purchase accounting adjustments stemming from the Sahara acquisition and effecting recognized revenues.

and Administrative Expenses.

General and administrative expenses for the three months ended September 30, 2021 were $11.9 million

and 20% of revenues, as compared to $3.3 million and 35% of revenues for the three months ended September 30, 2020.

The increase was

mainly a result of the additional personnel costs associated with the acquired Sahara operations, new hires for planned growth and stock

compensation issuances.

and Development Expenses.

Research and development expenses were $355 thousand and 0.6% of revenues for the three months ended

September 30, 2021, as compared to $471 thousand and 5% of revenues for the three months ended September 30, 2020.

General and administrative.

General and administrative expense consists of personnel related costs, which include salaries and stock-based compensation, as well as the costs of professional services, such as accounting and legal, facilities, information technology, depreciation and amortization and other administrative expenses.

General and administrative expense may fluctuate as a percentage of revenue, notably in the second and third quarters of our fiscal year when we have historically experienced our highest levels of revenue.

Research and development.

expense primarily consists of costs associated with development of our proprietary hardware and software technologies.

Expense (net).

Other expense (net) for the three months ended September 30, 2021 was $1.4 million, as compared to $2.5 million for

the three months ended September 30, 2020.

Other expense decreased primarily due to $1.1 million less in losses recognized upon the settlement

of certain debt obligations in exchange for issuance of common shares, offset by a $339 thousand increase in interest expense associated

with increased borrowings.

Income tax expense for the three months ending September 30, 2021 was $1.4 million, as compared no income tax expenses

for the three months ended September 30, 2020.

Income tax have been recognized in connection with our acquired Sahara operations.

Income (Loss).

Net income was $729 thousand in the three months ended September 30, 2021 and net loss was $4.2 million for

the three months ended September 30, 2020, respectively.

The Company had net income in the quarter, a result of achieving positive operating

income and operating margin in the quarter.

the nine-month periods ended September 30, 2021 and 2020

Total revenues for the nine months ended September 30, 2021 were $141.2 million as compared to $23.0 million for the nine months

ended September 30, 2020, resulting in a 514% increase in revenue.

The increase in revenues was primarily due to the acquisitions

of Sahara Presentation Systems in September 2020 and Interactive Concepts in March 2021, and increased demand for our solutions in the

U.S., Europe, and Australia.

Organic revenue growth for the nine months of 2021 was 125%.

Cost of revenues for the nine months ended September 30, 2021, were $104.0 million as compared to $16.7 million for

the nine months ended September 30, 2020, resulting in an 52 2% increase.

The increase in cost of revenues was associated

with the acquisitions and growth of the business as outlined above and was also due to additional increases in global freight/shipping

which the company has experienced as have many others as following the COVID-10 pandemic.

In the first quarter of 2021 we reported the

cost increase to be approximately four times higher as compared to pre-pandemic levels, this is expected to continue throughout

Gross profit for the nine months ended September 30, 2021 was $37.2 million as compared to $6.3 million for the nine months

ended September 30, 2020.

The gross profit margin decreased from 27% for the nine months ended September 30, 2020 to 26% in for the

nine months ending September 30, 2021, primarily driven by the effects of customs and freight expenses discussed above, and certain purchase

accounting adjustments stemming from the Sahara acquisition and effecting recognized revenues.

and Administrative Expenses.

General and administrative (“G&A”) expenses for the nine months ended September 30,

2021 were $32.8 million and 23% of revenue as compared to $10.4 million and 45% of revenue for the nine months ended September 30, 2020.

The increase in G&A expenses resulted from additional personnel costs associated with the acquired Sahara operations, new hires for

planned growth and stock compensation issuances.

and Development Expenses.

Research and development expenses were $1.3 million and 0.9% of revenue for the nine months ended

September 30, 2021, as compared to $1.1 million and 5% of revenue for the nine months ended September 30, 2020.

The absolute increase

in research and development expense was primarily driven by an increase in contract services related to software development.

Income (Expense) Net.

Other expense, net, for the nine months ended September 30, 2021 was $5.8 million as compared to other expense,

net, of $2.4 million for the nine months ended September 30, 2020.

Other expense increased primarily due to a $1.0 million increase in

interest expense associated with increased borrowings, and net movement year on year of $2.4 million of additional losses recognized

upon the settlement of certain debt obligations in exchange for issuance of common shares.

Income tax expense for the nine months ending September 30, 2021 was $3.9 million, as compared no income tax expenses

for the nine months ended September 30, 2020.

Income tax was recognized in connection with our acquired Sahara operations.

recorded a significant tax impact of $2.2 million during the second quarter of 2021 to reflect a discrete event directly pertaining to

the tax impact on our UK deferred tax liability associated with the intangible assets acquired as part of the Sahara business combination,

and the effect of a recent UK rate income tax rate change.

Finance Bill 2021 (“the Bill”) provides for an increase in the

UK statutory tax rate to 25% for taxpayers with profits over £250K beginning April 1, 2023.

We expect this rate to apply to the

earnings of our Sahara operations in the UK.

The Bill received Royal Assent on June 10, 2021 and it is considered enacted on that date

As such, we reflected the tax impact as a discrete event in our second quarter results.

The effective tax rate is (139.3)%

due to there being no tax expense/benefit for the legacy Boxlight entities, but the Sahara entities are fully taxable.

Net loss was $6.6 million and $7.6 million for the nine months ended September 30, 2021 and 2020, respectively.

decrease in the net loss was primarily due to the slightly lower gross profit margins, increased interest expense, increased tax expense,

amortization of intangible assets following the Sahara acquisition, stock compensation expense, and losses incurred on the settlement

of certain debt obligations in exchange for shares of our common stock.

provide investors with additional insight and allow for a more comprehensive understanding of the information used by management in its

financial and decision-making surrounding operations, we supplement our consolidated condensed financial statements, which are prepared

in accordance with GAAP with EBITDA and Adjusted EBITDA, with both non-GAAP financial measures of earnings.

represents net income (loss) before income tax expense, interest income, interest expense, depreciation, and amortization.

Adjusted EBITDA

represents EBITDA, plus stock compensation expense, the change in fair value of derivative liabilities, purchase accounting impact of

fair valuing inventory and deferred revenue, and non-cash losses associated with debt settlement.

Our management uses EBITDA and Adjusted

EBITDA as financial measures to evaluate the profitability and efficiency of our business model, and to assess the strength of the underlying

operations of our business.

These adjustments, and the non-GAAP financial measure that is derived from them, provide supplemental information

to analyze our operations between periods and over time.

Investors should consider our non-GAAP financial measures in addition to, and

not as a substitute for, financial measures prepared in accordance with GAAP.

following tables contains reconciliations of net losses to EBITDA for the periods presented.

Reconciliation

of net loss for the three months ended

30, 2021 and 2020 to EBITDA and adjusted EBITDA

(in thousands)

September 30, 2021

September 30, 2020

Depreciation and amortization

Interest expense

Research and development expense consists primarily of personnel related costs, prototype and sample costs, design costs and global product certifications mostly for wireless certifications.

Other income (expense), net

Other income (expense), net primarily consists of interest expense associated with our debt financing arrangements, gains (losses) on the settlements of debt and trade payable obligations exchanged for common shares, and the effects of changes in the fair value of derivative liabilities.

Income tax expense

Stock compensation expense

Change in fair value of derivative liabilities

Purchase accounting impact of fair valuing inventory

Purchase accounting impact of fair valuing deferred revenue

Net loss on settlement of Lind debt in stock

Adjusted EBITDA

Reconciliation

of net loss for the nine months ended

30, 2021 and 2020 to EBITDA and adjusted EBITDA

We are subject to income taxes in the jurisdictions in which we do business, including the United States, United Kingdom, Mexico, Sweden, Finland, Holland, and Germany.

The United Kingdom, Mexico, Sweden, Finland, Holland, and Germany have a statutory tax rate different from that in the United States.

Additionally, certain of our international earnings are also taxable in the United States.

Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to U.S.

income, the absorption of foreign tax credits, changes in the valuation of our deferred tax assets and liabilities and changes in tax laws.

We regularly assess the likelihood of adverse outcomes resulting from the examination of our tax returns by the U.S.

Internal Revenue Service, or IRS, and other tax authorities to determine the adequacy of our income tax reserves and expense.

Should actual events or results differ from our current expectations, charges or credits to our income tax expense may become necessary.

Any such adjustments could have a significant impact on our results of operations.

Operating Results – Boxlight Corporation

For the three-month periods ended March 31, 2022 and 2021

Total revenues for the three months ended March 31, 2022 were $50.6 million as compared to $33.4 million for the three months ended March 31, 2021, resulting in a 51.5% increase in revenue.

Revenues primarily consist of hardware revenue, software revenue, and professional development.

The increase in revenues was primarily due to the acquisition of FrontRow in December 2021, as well as increased demand for our solutions in the U.S.

FrontRow revenue for the three months ended March 31, 2022 was $6.5 million.

Cost of Revenues.

Cost of revenues for the three months ended March 31, 2022 was $38.0 million compared to $24.9 million for the three months ended March, 31, 2021, resulting in a 52.6% increase.

Cost of revenues consists primarily of product cost, freight expenses, customs expense, and inventory adjustments.

The increase in cost of revenues was associated with the acquisitions and growth of the business and was also due to additional increases in global freight/shipping which the company has experienced (as have many others) as a result of supply chain issues arising as a result of the COVID-19 pandemic.

During 2021, the cost increase was approximately four times normal costs as compared to pre-pandemic levels.

We expect such cost increases to continue throughout 2022.

Gross Profit.

Gross profit for the three months ended March 31, 2022, was $12.6 million, as compared to $8.6 million for the three months ended March 31, 2021.

The gross profit margin for the three months was 24.9% which is a reduction of 7 basis points compared to the comparable three months in 2021.

Gross profit margin, adjusted for the net effect of acquisition-related purchase accounting, was 27.4% as compared to the 28.0%, as adjusted, reported for the three months ended March 31, 2021.

As previously reported gross margins continue to be adversely impacted by supply chain challenges with increased freight costs

which are now expected to continue throughout 2022;

however, we anticipate gross profit percentage improvements in Q2 and beyond with reduced manufacturing costs.

General and Administrative Expenses.

General and administrative expenses for the three months ended March 31, 2022 were $15.5 million and 30% of revenues, as compared to $10.1 million and 30% of revenues for the three months ended March 31, 2021.

The increase was mainly a result of new hires for planned growth and stock compensation issuances.

Research and Development Expenses.

Research and development expenses were $612 thousand and 1.2% of revenues for the three months ended March 31, 2022, as compared to $474 thousand and 1.4% of revenues for the three months ended March 31, 2021.

Research and development expense primarily consists of costs associated with development of our proprietary hardware and software technologies.

Other Expense (net).

Other expense (net) for the three months ended March 31, 2022 was $1.5 million, as compared to $3.1 million for the three months ended March 31, 2021.

Other expense decreased primarily due to $2.7 million less in losses recognized upon the settlement of certain debt obligations in exchange for issuance of common shares, offset by a $1.3 million increase in interest expense associated with increased borrowings due to the new credit facility.

Income Tax Expense (benefit).

Income tax benefit for the three months ending March 31, 2021 was $86 thousand, as compared to $21 thousand in income tax expenses for the three months ended March 31, 2021.

Net loss was $4.9 million in the three months ended March 31, 2022 and $5.2 million for the three months ended March 31, 2021, respectively.

To provide investors with additional insight and allow for a more comprehensive understanding of the information used by management in its financial and decision-making surrounding operations, we supplement our condensed consolidated financial statements which are prepared in accordance with GAAP with EBITDA and Adjusted EBITDA, both non-GAAP financial measures of earnings.

EBITDA represents net income (loss) before income tax expense, interest income, interest expense, depreciation and amortization.

Adjusted EBITDA represents EBITDA, plus stock compensation expense, the change in fair value of derivative liabilities, purchase accounting impact of fair valuing inventory and deferred revenue, and non-cash losses associated with debt settlement.

Our management uses EBITDA and Adjusted EBITDA as financial measures to evaluate the profitability and efficiency of our business model, and to assess the strength of the underlying operations of our business.

These adjustments, and the non-GAAP financial measure that is derived from them, provide supplemental information to analyze our operations between periods and over time.

Investors should consider our non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.

The following table contains reconciliations of net losses to EBITDA and adjusted EBITDA for the periods presented.

(in thousands)

September 30, 2021

September 30, 2020

Depreciation and amortization

3 unchanged sentences

Change in fair value of derivative liabilities

Acquisition costs

Restructuring costs

Purchase accounting impact of fair valuing inventory

1 unchanged sentence

Net loss on settlement of Lind debt in stock

Net gain on forgiveness of PPP loan

Adjusted EBITDA

of Effect of Seasonality on Financial Condition

accounts on our financial statements are subject to seasonal fluctuations.

As our business and revenues grow, we expect these seasonal

trends to be reduced.

The bulk of our products are shipped to our educational customers prior to the beginning of the school year, usually

in, July, August, or September.

To prepare for the upcoming school year, we generally build up inventories during the second

quarter of the year.

Discussion of Effect of Seasonality on Financial Condition

Certain accounts on our financial statements are subject to seasonal fluctuations.

As our business and revenues grow, we expect these seasonal trends to be reduced.

The bulk of our products are shipped to our educational customers prior to the beginning of the school year, usually in July, August, or September.

To prepare for the upcoming school year, we generally build up inventories during the second quarter of the year.

Therefore, inventories tend to be at the highest levels at that point in time.

In the first quarter of the year,

inventories tend to decline significantly as products are delivered to customers and we do not need the same inventory levels during

the first quarter.

Accounts receivable balances tend to be at the highest levels in the third quarter, in which we record the highest

level of sales.

to some continuing travel restrictions and concerns for the safety for our employees during the ongoing COVID-19 pandemic, we have reduced

face-to-face meetings with customers and attendance at tradeshow events.

We have assessed the impact that these changes will have on

our peak season sales and have concluded that funding priority will be given to initiatives that provide for continuity of learning which

may result in lower priority on total learning solution sales including hardware, software, and teacher training.

and Capital Resources

of September 30, 2021, we had cash and cash equivalents of $6.2 million, a working capital balance of $32.0 million, and a current

ratio of 1.48.

This financial position represents a significant improvement from a year ago at September 30, 2020 when we had $9.6

million of cash and cash equivalents, a working capital balance of $25.1 million, and a current ratio of 1.80.

the nine months ended September 30, 2021 and 2020, we had net cash used in operating activities of $13.1 million and $7.0 million, respectively,

net cash used for investing activities of $943 thousand and $45.0 million respectively, and net cash provided by financing activities

of $7.2 million and $60.7 million, respectively.

We had accounts receivable net of allowances of $47.9 million and $20.9

million as of September 30, 2021, and year ended December 31, 2020, respectively.

addition to the cash flows generated by our ongoing operating activities we financed our operations during 2021 with a new $20.0 million

tranche of debt funded by our primary lender, and from a pre-existing accounts receivable financing arrangement with another lender who

purchases 85% of the eligible accounts receivable of the Company, for up to $15.0 million, with the right of recourse.

Our accounts receivable

and our ability to borrow against accounts receivable provides us with an additional source of liquidity as cash payments are collected

from customers in the normal course of business.

Our accounts receivable balance fluctuates throughout the year based on the seasonality

of our business.

the current lingering COVID-19 pandemic environment, the availability of debt and equity capital has been reduced and the cost of capital

has increased.

In the first quarter of the year, inventories tend to decline significantly as products are delivered to customers and we do not need the same inventory levels during the first quarter.

Accounts receivable balances tend to be at the highest levels in the third quarter, in which we record the highest level of sales.

Liquidity and Capital Resources

As of March 31, 2022, we had cash and cash equivalents of $11.3 million, a working capital balance of $49.6 million, and a current ratio of 2.02.

This financial position represents a significant improvement from a year ago at March 31, 2021 when we had $10.0 million of cash and cash equivalents, a working capital balance of $21.8 million, and a current ratio of 1.56.

In addition to the cash flows generated by our ongoing operating activities we financed our operations during first quarter 2022 with our new credit facility from Whitehawk.

In the current lingering COVID-19 pandemic environment, the availability of debt and equity capital has been reduced and the cost of capital has increased.

Increasing our capital through equity issuance at this time could cause significant dilution to our existing stockholders.

However, we are confident that the Company will be able to manage through the current challenges in the equity and debt finance markets

by managing payment terms with customers and vendors.

cash requirements consist primarily of day-to-day operating expenses, capital expenditures and contractual obligations with respect to

facility leases.

However, we are confident that the Company will be able to manage through the current challenges in the equity and debt finance markets by managing payment terms with customers and vendors.

Our cash requirements consist primarily of day-to-day operating expenses, capital expenditures and contractual obligations with respect to facility leases.

We lease all our office facilities.

We expect to make future payments on existing leases from cash generated from operations.

We have limited credit available from our major vendors and are required to prepay for the majority of our inventory purchases, which

further constrains our cash liquidity.

disclosed below, the Company entered into an accounts receivable agreement, effective September 30, 2020 (the “Accounts Receivable

Agreement”), between Sallyport Commercial Finance LLC (“Sallyport”) and the Company’s subsidiaries, Boxlight,

and EOSEDU LLC (the Subsidiaries”).

Under the terms of the Accounts Receivable Agreement, the Subsidiaries were originally

able to sell up to $6,000,000 (the “Maximum Facility Limit Amount”) of eligible accounts receivable that are accepted by

Sallyport for up to 90% of the face amount of each such eligible account.

On July 20, 2021, Boxlight and Sallyport amended the Accounts

Receivable Agreement (the “ARC Amendment”) for purposes of increasing the Maximum Facility Limit Amount to $13,000,000, as

well as increasing the minimum monthly sales from $1,250,000 to $3,000,000.

In exchange for entry into the ARC Amendment, Boxlight agreed

to a fee of $50,000, representing one percent of the increased Maximum Facility Limit Amount.

Other terms of the Accounts Receivable

Agreement remained unchanged.

On August 6, 2021, Boxlight and Sallyport entered into an additional amendment of the Accounts Receivable

Agreement (the “Second ARC Amendment”), which further increased the Maximum Facility Limit Amount to $15,000,000.

for entry into the Second ARC Amendment, Boxlight agreed to a fee of $20,000, representing one percent of the increased Maximum Facility

Limit Amount.

Other terms of the Accounts Receivable Agreement remained unchanged.

On August 23,

2021, the Company and Sallyport, as first lien creditor, and Lind Global Macro Fund, LP (“LGMF”) and Lind Global Asset Management,

LLC (“Lind Global”), together as second lien creditors, entered into the fourth amended and restated intercreditor agreement

(the “Fourth A&R Intercreditor Agreement”) for the sole purpose of increasing the permitted first lien cap thereunder

from $6 million to $20 million.

January 26, 2021, we entered into an agreement with Everest Display Inc., a Taiwan corporation (“EDI”), and EDI’s subsidiary,

AMAGIC Holographics Inc., a California corporation (“AMAGIC”), pursuant to which $1,983,436 in accounts payable owed by us

to EDI was settled in exchange for our issuance of 793,375 shares (the “2021 Shares”) of its Class A common stock to AMAGIC

at a $2.50 per share purchase price.

The 2021 Shares were issued to AMAGIC pursuant to an exemption from registration provided by Rule

506 of Regulation D under Section 4(a)(2) of the Securities Act.

September 21, 2020, we and Lind Global entered into a securities purchase agreement (the “Lind Global SPA”), pursuant to

which Lind Global purchased from the Company a $22,000,000 secured convertible note (the “Convertible Note”) in exchange

for payment to us of $20,000,000 (the “Funding”).

Under the terms of the Lind Global SPA, in addition to the issuance of

the Convertible Note, the Company paid to Lind (i) a commitment fee of $400,000 and (ii) a bonus fee (the “Bonus Payment”)

of $500,000 payable in shares of Class A common stock of the Company, with the per share price of the Bonus Payment shares calculated

based on the 20-day VWAP of the Class A Common Stock prior to closing.

The Convertible Note has a term of 24-months, bears a 4% interest

rate (0% interest so long as the Class A Common Stock trades at $3.50 or more per share), is repayable in 22 equal instalments commencing

60 days after the Funding and, at the option of the Company, may be repaid in either cash or Class A common stock.

Class A common stock

issuable to Lind Global in conjunction with the Bonus Payment and the Convertible Note was registered pursuant to a shelf takedown on

the Company’s existing shelf registration statement on Form S-3 (SEC File No.

conjunction with our entry into the Lind Global SPA and the issuance of the Convertible Note, on September 21, 2020, the Company and

Lind Global Macro Fund, LP, an affiliate of Lind Global, entered into a third amended and restated security agreement (the “Third

A&R Security Agreement”) for purposes of amending and restating a prior security agreement, dated as of February 4, 2020, between

the Company and Lind in order to incorporate the Lind Global SPA and the Convertible Note therein.

In addition, on September 21, 2020,

the Company, Sallyport Commercial Finance, LLC (“Sallyport”), as first lien creditor, and Lind and Lind Global, as second

lien creditors, entered into a third amended and restated intercreditor agreement (the “Third A&R Intercreditor Agreement”)

for purposes of amending and restating the second amended and restated intercreditor agreement, dated as of February 4, 2020, between

the Company, Sallyport and Lind, in order to (i) incorporate Lind Global as a second lien creditor and (ii) reaffirm and confirm the

relative priority of each creditor’s respective security interests in the Company’s assets, among other matters.

July 28, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Maxim Group, LLC, a

Delaware limited liability company (“Maxim”), pursuant to which Maxim, as representative of the underwriters, agreed to underwrite

the public offering (the “Offering”) of up to 15,000,00 shares of the Company’s Class A common stock, at a public offering

price of $2.00 per share, in addition to an overallotment option (the “Overallotment Option”) of 2,250,000 shares of Common

The Offering closed on July 31, 2020, with the sale of all 17,250,000 shares of the Company’s Common Stock, including the

Overallotment Option, for gross proceeds of $34,500,000.

Maxim acted as sole book-running manager, National Securities Corporation acted

as a co-manager for the Offering, and A.G.P./Alliance Global Partners (“A.G.P.”) acted as financial advisor.

As compensation

for underwriting the Offering, the underwriters received an underwriting discount of 7%, equaling approximately $2,415,000, in addition

to $60,000 in expenses.

A.G.P.’s compensation was paid out of the underwriting discount.

The Offering was made pursuant to the

Company’s effective shelf registration statement on Form S-3 (SEC File No.

333-239939) (the “Registration Statement”)

and the related base prospectus included therein, as supplemented by the prospectus supplement dated July 28, 2020 (the “Preliminary

Prospectus”) and the final prospectus supplement, filed July 29, 2020 (the “Final Prospectus” and collectively with

the Preliminary Prospectus, the “Prospectus”).

September 8, 2020, the Company entered into an underwriting agreement (the “September Underwriting Agreement”) with Maxim

pursuant to which Maxim agreed to underwrite the public offering (the “September Offering”) of 13,333,333 shares (the “Shares”)

of the Company’s Class A common stock at a public offering price of $0.75 per share.

The September Offering closed on September

11, 2020, and the Company sold the Shares for gross proceeds of $10,000,000.

In addition, the Company granted the underwriters

a 45-day option to purchase up to an additional 2,000,000 shares of Class A common stock at the public offering price less discounts

and commissions (the “September Over-Allotment Option”).

The September Over-Allotment Option was exercised in full on September

24, 2020, for additional proceeds of $1,500,000, through the sale of an additional 1,999,667 shares of Class A common stock.

as sole-bookrunner and National acted as co-manager for the September Offering.

Gross proceeds, before underwriting discounts

and commissions and estimated offering expenses, totaled $11.5 million.

As compensation for underwriting the Offering, Maxim and National

together received an underwriting discount of 7% of the Offering and the Over-Allotment Option and were reimbursed for up to $85,000

in underwriting expenses.

The September Offering was conducted pursuant to the Company’s registration statement on Form S-1 (SEC

333-238634) previously filed with and declared effective by the SEC.

Balance Sheet Arrangements

have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial

condition, results of operations or liquidity and capital resources.

Accounting Policies and Estimates

consolidated condensed financial statements are prepared in accordance with accounting principles generally accepted in the United States

In connection with the preparation of our financial statements, we are required to make assumptions and estimates

about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures.

We base our assumptions, estimates and judgments on historical experience, current trends, and other factors that management believes

to be relevant at the time our consolidated condensed financial statements are prepared.

On a regular basis, we review the accounting

policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP.

However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions

and estimates, and such differences could be material.

significant accounting policies are discussed in the notes to the unaudited consolidated condensed financial statements.

We believe that

the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results,

and they require our most difficult, subjective, or complex judgments, resulting from the need to make estimates about the effect of

matters that are inherently uncertain :

and Intangible assets

compensation expense

Growth Company

are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.

As an emerging

growth company, we may take advantage of certain specified reduced reporting and other regulatory requirements that are available to

public companies that are emerging growth companies.

provisions include:

exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting required by

Section 404 of the Sarbanes-Oxley Act of 2002;

exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;

exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring

mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional

information about our audit and our financial statements;

disclosure about our executive compensation arrangements.

have elected to take advantage of the exemption from the adoption of new or revised financial accounting standards until they would apply

to private companies.

As a result of this election, our financial statements may not be comparable to companies that comply with public

company effective dates.

Section 2(a)(19) of the Securities Act of 1933 and Section 3(a)(80) of the Securities Exchange Act of 1934, as amended, an emerging growth

company will lose its status upon the earliest of several conditions, one of which is reaching the last day of the fiscal year in which

the fifth anniversary of the company’s first sale of equity securities pursuant to an effective registration statement occurs.

We have limited credit available from our major vendors and are required to prepay for the majority of our inventory purchases, which further constrains our cash liquidity.

Recent Financing

To finance the acquisition of FrontRow, the Company and substantially all its direct and indirect subsidiaries, including Boxlight, Sahara and FrontRow as guarantors, entered into a maximum $68.5 million term loan credit facility, dated December 31, 2021 and as amended April 4, 2022 (the “Amended Credit Agreement”), with Whitehawk Finance LLC, as lender (the “Lender”), and White Hawk Capital Partners, LP, as collateral agent.

Under the terms of the Credit Agreement, the Company received an initial term loan of $58.5 million on December 31, 2021 (the “Initial Loan”) and was provided with a subsequent delayed draw facility of up to $10 million that may be provided for additional working capital purposes under certain conditions (the “Delayed Draw”).

The Initial Loan and Delayed Draw are collectively referred to as the “Term Loans.” The proceeds of the Initial Loan were used to finance the Company’s acquisition of FrontRow, pay off all indebtedness owed to our existing lenders, Sallyport Commercial Finance, LLC and Lind Global Asset Management, LLC, pay related fees and transaction costs, and provide working capital.

Of the Initial Loan, $8.5 million was subject to repayment on February 28, 2022, with quarterly principal payments of $625,000 and interest payments commencing March 31, 2022 and the $50.0 million remaining balance plus any Delayed Draw loans becoming due and payable in full on December 31, 2025.

The Term Loans will bear interest at the LIBOR rate plus 10.75%;

provided that after June 30, 2022, if the Company’s Senior Leverage Ratio (as defined in the Credit Agreement) is less than 2.25, the interest rate would be reduced to LIBOR plus 10.25%.

Such terms are subject to the Company maintaining a borrowing base in terms compliant with the Credit Agreement.

On March 29, 2022, the Company received a Notice of Events of Default and Reservation of Rights (the “Notice”) from the Collateral Agent, alleging, among other things, defaults as a result of (i) failure to repay $8.5 million of the facility by February 28, 2022, (ii) non-compliance with the borrowing base resulting in the Company being in an over advance position under the Credit Agreement, and (iii) failure to timely provide certain reports and documents.

As a result of the Notice, all accrued and unpaid interest owed under the Term Loan, became subject to a post-default interest rate equal to the highest interest rate allowed for under the Credit Agreement plus 2.50% until such time as the Events of Default are either waived or cured.

Following the Company’s receipt of the Notice and pursuant to amendment to the Credit Agreement, dated April 4, 2022, the Collateral Agent and Lender agreed to extend the terms of repayment of the $8.5 million originally due on February 28, 2022 until February 28, 2023 and waive and/or otherwise extend compliance with certain other terms of the Credit Agreement in order to allow the Loan Parties adequate time to comply with such terms.

The principal elements of the amendment included (a) an extension of time for the Loan Parties to repay $8.5 million of the principal amount of the term loan from February 28, 2022 to February 28, 2023, and (b) forbearance on $3,500,000 of over advances to grant the Loan Parties until May 16, 2022 to allow the Company to come into compliance with the borrowing base requirements set forth in the Credit Agreement.

In such connection, the Loan Parties have since obtained credit insurance on certain key customers whose principal offices are located in the European Union and Australia as, without the credit insurance, their accounts owed to the Loan Parties had been deemed ineligible for inclusion in the borrowing base calculation primarily due to the perceived inability of the Collateral Agent to enforce security interests on such accounts.

In addition, the Lender and Collateral Agent agreed to (i) reduce, through June 30, 2022, the minimum cash reserve requirement for the Loan Parties, (ii) reduce the interest rate by 50 basis points (to Libor plus + 9.75%) after delivery of the Loan Parties’ June 30, 2023 financial statements, subject to the Loan Parties maintaining 1.75 EBITDA coverage ratio, and (iii) waive all prior Events of Default under the Credit Agreement.

In conjunction with the amendment to the Credit Agreement, the parties entered into an amended and restated fee letter (the “Fee Letter”) pursuant to which the parties agreed to prepayment premiums of (i) 5% for payments made on or before December 31, 2022, (ii) 4% for payments made between January 1, 2023 and December 31, 2023, and (iii) 2% for payments made between January 1, 2024 and December 31, 2025.

Furthermore, the parties agreed that no prepayment premiums would be payable with respect to the first $5.0 million paid under the Term Loan, any payments made in relation to the $8.5 million due on or before February 28, 2023, any required amortization payments under the Credit Agreement and any mandatory prepayments by way of ECF or casualty events.

Off Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results of operations or liquidity and capital resources.

Critical Accounting Policies and Estimates

Our consolidated condensed financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

In connection with the preparation of our financial statements, we are required to make assumptions and

estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures.

We base our assumptions, estimates and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our consolidated condensed financial statements are prepared.

On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP.

However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in the notes to the unaudited consolidated condensed financial statements.

We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective, or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain :

Revenue recognition

Business acquisitions

Goodwill and Intangible assets

Stock-based compensation expense

Status as Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.

As an emerging growth company, we were able to take advantage of certain specified reduced reporting and other regulatory requirements that are available to public companies that are emerging growth companies.

These provisions include:

(1) an exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002;

(2) an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;

(3) an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements;

(4) reduced disclosure about our executive compensation arrangements.

We elected to take advantage of the exemption from the adoption of new or revised financial accounting standards until they would apply to private companies.

As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

Under Section 2(a)(19) of the Securities Act of 1933 and Section 3(a)(80) of the Securities Exchange Act of 1934, as amended, an emerging growth company will lose its status upon the earliest of several conditions, one of which is reaching the last day of the fiscal year in which the fifth anniversary of the company’s first sale of equity securities pursuant to an effective registration statement occurs.

For the Company, this will occur on January 1, 2023.

Quantitative and Qualitative Disclosure About Market Risk

a “smaller reporting company,” this item is not required.

As a “smaller reporting company,” this item is not required.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis